USA TODAY, Editorial/Opinion
5/4/2004
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

http://www.usatoday.com/news/opinion/editorials/2004-05-04-oppose_x.htm

Editorial opinion of USA TODAY (concluding remarks):

Two in three Americans favor lifting the ban on reimporting drugs, an Associated Press poll in February found. Still, taking advantage of foreign price controls amounts to putting a Band-Aid on a deep wound.

Letting the free market work is a better remedy for making prescription drugs more affordable for all Americans.

http://www.usatoday.com/news/opinion/editorials/2004-05-04-our-view_x.htm

For an article on the federal buying power of the VA (“America’s best discount drugstore is run by the federal government.”):

http://www.baltimoresun.com/business/bal-bz.vadrugs05may05,0,902614.story?coll=bal-business-headlines

Comment: The United States has much more of a “free market” in pharmaceuticals than any other nation, and everyone agrees that the market has been very ineffective in providing affordable access to drugs for tens of millions of patients with significant health care needs. You almost feel embarrassment for the editorial staff of USA TODAY when you read that they propose the really dumb solution of allowing the continuation of the market model that utilizes measures designed to excessively benefit the pharmaceutical industry while avoiding its responsibilities to a major segment of the nation’s patients.

In negotiations with a single-payer national health insurance program, pharmaceutical firms would be assured of fair profits and adequate funds for research. We need their industry, but we don’t need their excesses. Let’s set up our own public insurance program and then negotiate with them. They’ll get a fair deal, and we will too.

Health Affairs
May/June 2004
U.S. Health Care Spending In An International Context
Why is U.S. spending so high, and can we afford it?
By Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

From the ‘Abstract’:

Using the most recent data on health spending published by the Organization for Economic Cooperation and Development (OECD), we explore reasons why U.S. health spending towers over that of other countries with much older populations. Prominent among the reasons are higher U.S. per capita gross domestic product (GDP) as well as a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs. We examine the economic burden that health spending places on the U.S. economy.

From the section ‘Pricing Low-Income Americans Out Of Health Care’:

This prospect (projected premium for family coverage of over $20,000 one decade from now) puts U.S. policymakers at a crossroads.

One approach would be to persuade the upper half of families in the nation’s income distribution to help purchase adequate health insurance for families in the lower third. One may call it the “universal health insurance” road. It would, of course, involve added taxes and transfers flowing through government budgets, which would bring with them additional government regulation, especially if the aim were to structure the U.S. health system as a one-tier system in which sick people have roughly the same health care experiences regardless of their own ability to pay.

The alternative option would be to embrace as official policy, both in employment-based health insurance and in public insurance programs, a multi-tier health system in which a person’s health care experience would be allowed to vary by his or her ability to pay for health care. In such a system families in the upper half of the income distribution would have a noticeably superior health care experience than families in the lower half would have. This is certainly already the case for U.S. families with good health insurance and those without it.

The emerging political battle at this crossroads is unlikely to be styled in stark terms such as “rationing by income class” or “one-class” versus “two-class” medicine. Instead, it will be styled as a debate over “market competition versus government regulation”; as a simple, technocratic quest for greater “efficiency”; or as the dubious dichotomy of “rationing versus markets,” even though textbooks in economics instruct the reader that market prices are just another way of rationing scarce commodities, on the basis of ability and willingness to pay. At its core, then, the debate over health care, in the United States as elsewhere, is less a pure macroeconomic issue than an exercise in the political economy of sharing.

http://content.healthaffairs.org/cgi/content/abstract/23/3/10?etoc

Comment: This article answers the questions posed in only 16 pages. It should be downloaded and retained as a resource that can be used to dismiss the myths on affordability while defining precisely the actual economic issues that we are facing.

Download this article now. It should be read in its entirety and retained as an essential reference in your health policy library.

Martha Livingston, Ph.D., Associate Professor of Health and Society, SUNY College at Old Westbury, responds to the message on the insurance industry effectively classifying female gender as a preexisting disorder:

I’m going to bring this to my last women’s health class of the semester tonight; what better way to illustrate the points we’ve been making all semester?

Years ago I had a button, which I’m planning to have duplicated, that says:

“Life: a preexisting condition spread by sexual contact which is invariably fatal.”

JAMA
April 21, 2004
Reinvention of Health Insurance in the Consumer Era
By James C. Robinson, PhD, MPH

The new products and policies will test the limits of US individuals’ willingness to assign responsibility for financing health care to those individuals who use it and exempt those who do not.

On the positive side, a shift in decision-making responsibility from the employer to the employee and from the insurer to the enrollee will create a social consciousness of the imperative to establish priorities as to who will receive which services now, which later, and which never. A greater sense of personal responsibility among patients for their own health and health care will attenuate some forms of cost inflation and support the prevention and treatment of many chronic conditions. But individual patients require financial subsidies, valid information, and empathetic support if they are to grapple successfully with the difficult challenges of illness and medicine. During the long term, the insurance industry will need to combine its contemporary focus on consumers with a commensurate focus on physicians, administrative simplicity, and the social pooling of risk if it is successfully to balance limited resources and unlimited expectations in health care.

http://jama.ama-assn.org/cgi/content/full/291/15/1880

Comment: Success will require “administrative simplicity” and “the social pooling of risk.” But those will never come from the insurance industry. We’ll have to accomplish those by adopting our own public program of universal insurance.

Contra Costa Times
Apr. 29, 2004
Kaiser adds deductibles to some insurance plans
By Judy Silber

Kaiser Permanente is the last large insurer to add deductibles to individual insurance plans purchased by people without coverage through work. By forcing consumers to pay for more of their care, deductibles lower monthly premiums…

“If we don’t follow the market, people will lose access to health care”, said Christine Paige, Kaiser’s senior vice president of marketing. “We have members who have been here their entire lives. We don’t want to abandon them as the market changes.”

Kaiser has set its deductibles relatively low compared with what’s offered by other insurers. Other insurers offer plans with deductibles as high as $5,000. But Kaiser’s deductible will be $1,500 for individuals, $1,000 or less for small employers and $1,000 initially for large firms.

But Karen Pollitz, a senior health policy researcher at the Health Policy Institute at Georgetown University, noted that deductibles contradict Kaiser’s mission of removing — rather than erecting — barriers to care.

“It’s too bad because Kaiser wrote the book on managing health care and disease,” Pollitz said. “I think they just made their task a lot harder.”

For people who don’t visit the doctor often, deductibles can lower overall out-of-pocket costs by decreasing the amount paid for monthly premiums.

But for those in need of care, deductibles add to their cost burden. Pollitz worries that will discourage people, especially those with chronic diseases, from seeking care.

Kaiser felt pressure to offer the deductible plans because it was losing members, Paige said. They (high-deductible plans) are an industry standard for the individual market, and employers are increasingly considering them as an option to stabilize premiums.

http://www.contracostatimes.com/mld/cctimes/business/8547735.htm

Comment: Rather than addressing health care costs, insurers and purchasers have narrowed their attention to the price of health insurance premiums in order to make health insurance affordable. The tragedy is that, as health insurance plans become more affordable, health care is becoming much less affordable for precisely those individuals with significant health care needs because of the dramatic increases in out-of-pocket expenses that they are facing.

Kaiser Permanente did not have much choice. Their competitors, especially Blue Cross and Blue Shield, have dominated the market with low-premium,high-deductible plans. Individuals with significant needs were selecting Kaiser because of its comprehensive coverage. By concentrating high-cost patients within their plans, Kaiser was faced with the prospect of driving premiums up even further and then losing market share because of unaffordable premiums (the “death spiral” of insurance premiums). Using standard market principles, they were forced to offer a competitive-market insurance product.

The marketplace, by making health plans affordable, has made health care unaffordable for those who need it. The unintentionally perverse, amoral nature of market dynamics has established the principle that the marketplace is not the proper environment to guide the financing of health care.

In sharp contrast, a universal program of social insurance would ensure that health care would be affordable for all who are in need. Isn’t that what we should be striving for?

The Globe and Mail
April 29, 2004
Pettigrew clarifies health-care statements
By Campbell Clark and Brian Laghi

AND

Calgary Herald
April 29, 2004
From good to bad in hours
By Tom Olsen

Health Minister Pierre Pettigrew backtracked yesterday from his statements about allowing private health-care delivery…

Canada’s Health Minister Pierre Pettigrew:

“Unfortunately, I now realize that I have left the impression that I favour increased private delivery within the public health system. That was in no way my intent, nor is that the intent of the Government of Canada.

“To put it as plainly as I can, the ambition of the federal government is not to encourage private delivery even within the terms of the Canada Health Act. Quite the contrary, our ambition is to expand public delivery because, as Roy Romanow said it very well, public delivery provides Canadians with the best system possible.”

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040429/HEALTH29/TPHealth/

http://www.canada.com/calgary/calgaryherald/news/story.html?id=84d78fc4-0220-4ad5-aa0f-8f7b38c34cd7

Comment: Some construed yesterday’s message as an attack on the profits that can be realized in the health care delivery system. In my comment, I referred to “the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system.”

In discussing the problems with for-profit corporations, the operative term is not “profit” but rather “investor-owned corporations.” Profits are just as essential in health care as they are in any other sector of our economy. But the primary mission of health care providers should be to deliver the best possible health care services and products while retaining a fair profit.

The primary responsibility of a board of directors of an investor-owned corporation is to provide maximum shareholder value through stock appreciation and distributed dividends. And boards of for-profit corporations frequently reward themselves with significant ownership. This clear conflict of interest between shareholders and patients leads to a health care delivery system that, as Mme. Desjarlais indicated, is “more costly, less efficient and even more dangerous to patient care than the regular public system.”

It is a relief to see that Health Minister Pettigrew now sees that the Canadian citizens are quite serious when they say that they want a health care system dedicated to patients rather than investors.

The Globe and Mail
April 29, 2004
Pettigrew clarifies health-care statements
By Campbell Clark and Brian Laghi

AND

Calgary Herald
April 29, 2004
From good to bad in hours
By Tom Olsen

Health Minister Pierre Pettigrew backtracked yesterday from his statements about allowing private health-care delivery…

Canada’s Health Minister Pierre Pettigrew:

“Unfortunately, I now realize that I have left the impression that I favour increased private delivery within the public health system. That was in no way my intent, nor is that the intent of the Government of Canada.

“To put it as plainly as I can, the ambition of the federal government is not to encourage private delivery even within the terms of the Canada Health Act. Quite the contrary, our ambition is to expand public delivery because, as Roy Romanow said it very well, public delivery provides Canadians with the best system possible.”

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040429/HEALTH29/TPHealth/

http://www.canada.com/calgary/calgaryherald/news/story.html?id=84d78fc4-0220-4ad5-aa0f-8f7b38c34cd7

Comment: Some construed yesterday’s message as an attack on the profits that can be realized in the health care delivery system. In my comment, I referred to “the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system.”

In discussing the problems with for-profit corporations, the operative term is not “profit” but rather “investor-owned corporations.” Profits are just as essential in health care as they are in any other sector of our economy. But the primary mission of health care providers should be to deliver the best possible health care services and products while retaining a fair profit.

The primary responsibility of a board of directors of an investor-owned corporation is to provide maximum shareholder value through stock appreciation and distributed dividends. And boards of for-profit corporations frequently reward themselves with significant ownership. This clear conflict of interest between shareholders and patients leads to a health care delivery system that, as Mme. Desjarlais indicated, is “more costly, less efficient and even more dangerous to patient care than the regular public system.”

It is a relief to see that Health Minister Pettigrew now sees that the Canadian citizens are quite serious when they say that they want a health care system dedicated to patients rather than investors.

The StarPhoenix (Saskatoon)
April 28, 2004
Ottawa opens up medicare
By Mark Kennedy

The federal government will not stand in the way of provinces that want to “experiment” with medicare by hiring for-profit private companies to deliver medical services within the publicly funded system, says Health Minister Pierre Pettigrew.

The declaration came Tuesday after an appearance before a House of Commons committee, where Pettigrew was grilled by MPs over his government’s commitment to enforcing the Canada Health Act and to allowing more privatization.

Pettigrew was remarkably blunt in his responses to MPs, providing what was likely the most direct statement in recent years by a federal health minister about private-sector delivery of medicare.

“Public administration is the principle, not public ownership. There’s a difference between public ownership and public administration.”

At the committee, New Democrat MP Bev Desjarlais pushed Pettigrew for a clear answer on whether the Liberal government will stop the growing trend of provinces using private firms to deliver medicare to patients.

But Pettigrew repeatedly stressed that the Canada Health Act does not forbid this.

It was also a hot political topic that Roy Romanow addressed in his royal commission report on health care two years ago. He warned about the “potential risks to the integrity and viability of our health-care system that might result from an expanded role for private providers.”

In a heated exchange Tuesday, Desjarlais told Pettigrew he is supporting the use of taxpayers’ dollars to help for-profit health companies — even though many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.

“There needs to be a real outright honesty with Canadians,” she said. “The government should just come out and say, ‘We are going to promote for-profit health-care service delivery.’ “

Clearly angry by the charge, Pettigrew shot back: “You choose your words, and I’ll choose mine Mrs. Desjarlais. I have been making my position very clear and I am as honest with Canadians as you are. I know you like to be virtuous. I like to be very frank and honest as well.”

http://www.canada.com/saskatoon/starphoenix/story.asp?id=9D3D1B4E-2D2D-430E-AB6D-2C457D42A7B1

Comment: Two major themes permeate our health care reform efforts in the United States. Of greater importance, we clearly see the need to establish a method of financing health care that will enable access to affordable, comprehensive care for everyone. We believe that the single payer model of universal social insurance would be the most effective. The other issue that we address is the perverse incentives created by including for-profit corporations and their passive investors in the health care delivery system. As Mrs. Desjarlais indicated, “many studies have shown they are more costly, less efficient and even more dangerous to patient care than the regular public system.”

Our first task will be to establish an equitable, publicly funded and publicly administered, universal health insurance program. Then we can tackle the much more difficult problem of misuse of our resources that is designed to benefit investors.

Canada has already accomplished both of our goals, although there is still more for them to do. But it would be tragic if Canadian politics were effective in rejecting the “virtuous” in favor regressing to “frank” for-profit health-care service delivery.